perceived future investment return

comparison with similar assets

Additional value place on an asset, unique to an individual investor

Total Asset - Total liabilities

aka Net asset value

Original cost - depreciation, amortization or impairment cost

amount that could be realized by selling the assets of a business in a forced or distressed situation

amount that could be obtained by selling the business as a whole, assuming that it will continue to operate and generate cash flows in the future

the price at which an asset would change hands between a willing buyer
and a willing seller and neither buyer or seller are under any compulsion to buy or sell.

Controlled by the Entity

Result of past event

Economic resource

Expected to be sold, collected, or used within a year

No interest charge

Charged interest

Determine portion of receivables that is a renewal of prior receivables

Analyze adequacy of allowances for discounts, returns, and other credits

Goodwill

PPE

Purpose

Held to Maturity

Trading

Available for sale

Significant influence
20-50%

Controlling interest
above 50% holding

Trading or Available for sale

=current assets - current liabilitie - interest bearing liabilitiess

= change in non current asset between 2 period + depreciation of the period

Change in interest-bearing debt (BOTH CURRENT AND NON CURRENT)

Other NCL = CHANGE to the remaining NON CURRENT LIABILITIES AND MINORITIES INTEREST

= FCFE - Net borrowing + Interest (1-T)

change in number of share (no of share buy back)

The number of shares the bond holder gets when converting one bond into shares.

Implied purchase price in the bond currency of the convertible upon conversion is face value /
conversion ratio

• -Cost of asset
• +PV(payment)
• -PV (Tax saving/cost on lease payment)

• +PV (tax saving on depreciation)
• +PV(after tax residual value)
  

ownership transfer to lessee
=>the financial risk of the lessor is not that high and can borrow at a lower rate.

= Equity of last period (t-1) + earning of current t - Equity of current t

Note: VD = value of debt-> difficult to find => use book value of debt

covariance between stock return vs market return

Prohibits personal loans to directors and executive office

Restriction on stocks sale during retirement plan blackout periods

On average, how many day the firm will collect the payment of sale on credit

(Income + tax expense + interest expense) / interest expense

Buybacks offer more flexibility than dividends. Companies can adjust buybacks based on their financial situation.

Some managers receive stock options or other compensation tied to the stock price. Buybacks can increase the stock price, potentially benefiting these managers.

the concept that the combined value and performance of two companies will be greater than the sum of the separate individual parts.

Target always gains as unable to sell with lower price than the market price

Not all +NPV can be financed/go to market when needed

sometime, lenders do not understand or trust new venture

some doesnt exist, some difficult to get (as new venture)

Debt may inhibit growth as firm need to repay loans rather than invest in growth

Investment bank that manages security issuance and design its structure

Old share holder forbid to share in secondary market for a certain time

difference between public offer price and price paid by under writer

Underwrite guarantee to sell all the stock at offer price

Underwriter does not guarantee to sell all the stock, sell the stock for the best possible price

Raising capital

Exposing to bigger market

use share a collateral for loan

Create public share for future M&A

Establish market price or value for firm

Discussion

Negotiation

Preparing

Waiting

Financial cost, including accounting, legal, printing

IPO are underpriced because informed investors have better info and only buy cheap deals. To attract uninformed investors who rely on price as a value signal, companies lower the offering price

Lower prices entice informed investors to reveal how much they really value the IPO, helping set a fair price.

Jump on the bandwagon: Lower prices create a sense of hotness, attracting more investors who fear missing out.

Underwriting can be risky, but underpricing might be done to avoid lawsuits in some places, even if not always effective.

a successful IPO (due to underpricing) creates goodwill, allowing the company to raise money at higher prices later. There's not much evidence to support this though.

Underwriters take a risk if they can't sell all the shares. Lower prices can make them easier to sell, reducing the underwriter's risk.

Underpricing can be seen as leaving money on the table for the company's owners. The initial price gain could have been captured by selling fewer shares, resulting in less dilution (ownership stake decrease) for the owners.

People tend to feel less excited about gains than they feel bad about losses. So, if the IPO price is higher than expected (even if it's underpriced compared to the true value), managers might be satisfied due to exceeding expectations (prospect theory).

: Companies often only sell a small portion of their shares in the IPO. This means they can raise additional capital later through a secondary offering, potentially at a higher price if the company performs well after going public

underprice => significant price increase after IPO => Attract media => free marketing

Companies aim for a consistent dividend payout ratio (percent of profit paid as dividends) in the long term.

Managers focus on increasing or decreasing dividends, not necessarily the exact amount paid.

Dividend changes reflect long-term earning trends, not short-term fluctuations.

Managers avoid cutting dividends if they think it might need to be raised again later.

Companies may also buy back their own stock (rep repurchase) if they have extra cash or want to adjust their capital structure.

Clientele Effect: Some investors prefer companies that pay regular dividends, so attracting these investors by offering dividends can increase the company's value.

Signaling: Increasing dividends can be seen as a positive sign by the market, indicating strong financial health and potentially leading to a higher stock price.

Wealth Transfer: Paying dividends can be a way to transfer wealth from bondholders (who receive interest payments) to stockholders (who receive dividends).

Agency Costs: Dividends can act as a control mechanism on managers. By forcing them to pay out some cash, it reduces the risk of them using the money for unnecessary investments or empire building.